The Consumer Price Index (CPI) was up 5.4% year-over-year in June versus up 5.0% in May. Core CPI (CPI less food and energy) was up 4.5% year-over-year in June, versus up 3.8% in May. Inflation is currently running well above the Fed’s longer-run target of around 2.0%. However, Fed Chair Powell reiterated this week that policymakers believe that most of the factors fueling near-term inflationary pressures will be temporary. While we expect supply chain bottlenecks will continue to put upward pressure on prices over the near- to intermediate-term, base effects from the pandemic will likely start to phase out in the coming months. As such, we believe we may be at or near the peak of year-over-year inflation rates. The Federal Open Market Committee will hold its next policy meeting on July 27-28 and we expect that inflation will be a central talking point. However, we continue to believe the Fed will proceed with caution, in terms of monetary policy changes, particularly given the high number of people who remain unemployed and continued uncertainty about the pandemic and impact of COVID-19 variants.
Rates Steady, Inflation Signals Persist
May 1, 2026
The Federal Open Market Committee (FOMC) held the federal funds rate at 3.50% to 3.75% on April 29, an outcome